State of Massachusetts may impose a tax on website design and other services

The governor of the state of Massachusetts has proposed a new tax within the state that could apply to cloud-based services. If the Massachusetts state legislature approved the governor's plan, the state tax on "canned software" would be expanded covering some elements of cloud computing.

The proposal is for a tax of 4.5%, which is lower than the state 6.25% sales tax. The tax plan does call for an exemption for people that store music or digital books on the cloud. According to members of Governor Deval Patrick's administration, the tax would bring in an estimated $265 million during 2014.

"We need our tax code to catch up with the way that technology is affecting everyone in their daily lives," said David Sullivan, legal counsel for the Executive Office for Administration and Finance in WBUR's story.

The tax expansion would cover custom-designed software and some services that run in the cloud. The custom software design services would include things such as website designs, Java software, PHP coding, and other custom software coding. The tax expansion would also apply the 4.5% tax to the cost of hosting a website and bandwidth needed to operate the website.

Some of the details on the service are still unknown. However, if the tax applies to hosting, bandwidth, storage, security, and other services it would potentially be applied to anything a company uses is not hosted on the premises.